Bonds

PREPA bondholders seek documents to support lift of stay

Puerto Rico Electric Power Authority bondholders requested documents they say will support their motion to lift the stay on seeking a receiver, in a motion filed Monday night.

Syncora Guarantee and GoldenTree Asset Management want documents detailing PREPA’s monthly reports of financial activity to determine how PREPA is calculating and disposing of net revenues.

Further they hope the documents will contradict the Puerto Rico Oversight Board’s arguments that at times the net revenues have not existed or been misappropriated, and the monthly reports are inconsistent with PREPA’s audited financial statements.

Syncora and GoldenTree made the request in support of a renewed lift stay motion made by holders and insurers of 40% of PREPA bonds in February. These parties want the U.S. District Court for Puerto Rico to lift the stay on the bondholders’ seeking a receiver to take over PREPA.

Syncora and GoldenTree Asset Management are seeking documentation of what happened to PREPA’s net revenues.

The bond parties claim that since the start of the bankruptcy, in the summer of 2017, PREPA has illegally and improperly diverted $3 billion in revenues that should have been deposited in the authority’s sinking fund to pay off bonds. They seek documents they say will show what happened to the revenues.

While the Oversight Board maintains the motion to lift the stay is without merit, “bondholders are entitled to discovery as to the factual positions that the Oversight Board raised,” Syncora and GoldenTree said.

Further, the “Oversight Board cannot raise key factual disputes to support its opposition — factual disputes that are contrary to its contemporary records — and then deny discovery with respect to such factual disputes,” Syncora and GoldenTree said.

The board said Syncora and GoldenTree’s requests should have been made in March’s confirmation hearing. In response, the bond parties said the board didn’t tell the court the monthly reports were inaccurate until well after the confirmation hearing.

“GoldenTree is positioning for a quick move to the appointment of a receiver if the appeals court reverses or remands the PREPA lien opinion,” said Cate Long, Puerto Rico Clearinghouse principal. She added the Board has refused to increase electricity rates to pay debt service.

The Puerto Rico Oversight, Management, and Economic Stability Act bars the court “from interfering in the government’s assets,” Long said. “Conceivably the only way bondholders will get paid is via the appointment of a receiver.”

If the appeal fails, she said, it “creates another avenue of litigation based on an appeals court ruling that revenues should have been deposited in the sinking fund until a plan of adjustment is confirmed.”

PREPA bondholders in late April asked U.S. District Judge Laura Taylor Swain to consider new projections of additional electricity use in deciding on the plan. She set a May 10 deadline for the other parties to comment and bondholders will have until May 14 to respond.

As of Tuesday afternoon, Swain hadn’t ruled on the bond parties’ motion for documents.

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